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Everything you need to know about UBS’s new strategy for its investment bank

Yesterday UBS unveiled its new strategy. There were a lot of slides, not all of them meaningful. Scattered among the pie charts and management jargon, there were however, some important points. They were as follows:

1) UBS is still cutting headcount by 1,300 people

UBS still wants to cut headcount by 1,300 people by 2013. These cuts have already been announced and ‘initiated’ during the first nine months of 2011. Their full impact will be felt in 2012.

2) An additional 300 people will disappear as a result of “attrition” and “restructuring”

Expect a lot of zero bonuses this year as UBS attempts to persuade people to leave of their own accord. Also expect a lot of internal transfers into risk or event management.

3) The big cuts will come in ‘FICC macro directional trading,’ FICC asset securitization, FICC complex structured products, and credit

Fixed income currencies and commodities (FICC) macro directional trading equates to long term rates and currency bets. UBS already got rid of its entire 13 person macro directional trading team last month, so this may be a done deal.

It expects credit revenues to fall by CHF200m.

4) Some FICC jobs will be perfectly safe

Just because you work in FICC at UBS, that doesn’t mean you’ll definitely find yourself out of work.

Some FICC jobs at UBS will remain stable. For those who can’t see the table below, these include: FICC leveraged finance, FICC credit solutions and FICC FX.

UBS even plans to expand some areas of those FICC business. Hiring is likely to take place in: special situations and commodities.

The full table outlining the bank’s intentions is below.

UBS FICC investor day

5) UBS is pulling out of equity prop trading

UBS pulled out of fixed income prop trading a long time ago. Now it’s pulling out of equity prop trading too.

6) UBS is hiring in IBD

Carsten Kengeter said the bank wants to, “strengthen US UBD,” and “restore EMEA IBD market share.” In EMEA, this may imply upgrading. UBS has hired 28 MDs in IBD already this year.

7) UBS may also be hiring in these other areas

These are the investment banking areas UBS wants to focus on: advanced algorithmic trading; next generation automated trading platforms; sales driven risk mitigation solutions; US and Brazil, Delta one trading. It also plans to do more to: ‘monetize research.’

8) More investment bankers will be needed to deal with ultra high net worth clients

UBS wants to provide ‘institution-like coverage’ to UHNW individuals. This could be taken to imply that more experienced coverage bankers will be moved into the private bank.

9) It’s not easy restructuring an investment bank

Slide six illustrates the conundrum faced by anyone who would restructure an investment bank. Namely: low capital intensity areas have high costs and a low ROE; high capital intensity businesses have low costs and a high ROE.

UBS strategy issues

10) Deutsche will be the big beneficiary of all this

As the Financial Times’ Lex column points out, as a big European fixed income house, Deutsche should be the big beneficiary of the restructuring and uncertainty in UBS’s fixed income business. BarCap may seize share too.

Comments (11)

  1. How the mighty falls……..

    I started my career on the graduate programme at UBS in 2003 just after the tech crisis. I still remember the enthusiastic and confident speeches from the then guy in charge John Costas and his entourage, Rob Wolfe et al. The message was clear. UBS at the time was considered the best European Bank on wall street and now the goal was to be best bank on wall street. Apparently we were better than DB and definitely ahead of CS (who were struggling at the time) but now was the time to beat Goldman, MS and JPM. Bonuses paid were on par with the best and the mood was very positive. Fear was non existent and stories about how the firm was hardly dented during previous crises e.g our heavy losses during the long term capital management saga just caressed all egos. Costas then decided to set up an internal hedge fund and UBS heavily piled into structured credit. Risky assets and trades were not feared as long as the potential return was there. The rest is now history……

    I left UBS in 2006 and find its demise both interesting and sad. The industry is truely at a changing point.

    Costas Protege Reply
  2. I can’t find Risk Management in any of the slides above?

  3. @ Costas Protege – Who cares about your boring professional life?

  4. What about Equity Delta 1 trading, do you think they’ll be hiring there?

    Kweku, HMP Wandsworth Reply
  5. @gs banker – he is sitting next to you chump

  6. @ Costas Protege – it is truly and not ‘truely’, people like you – with an appalling level of education are the reason why the industry is ‘truely’ changing.

    unemployed geek Reply
  7. @Unemployed Geek, it is people like you that give the banking sector a horrible reputation. It is because of birds of your feathers, that every politician thinks the best way to get votes is by smacking the banking sector in the ‘kanyiki’ (go figure what that means). And that, my friend, is the real reason why this industry is ‘truly’ changing – its all because of egos like yours. Good luck to your future employers!!

  8. What exactly is Credit Solutions?

    Putting ‘Solutions’ instead of ‘Structured’ on my CV now! Reply
  9. Banking lost its purpose a long time ago but while it was making money no one seemed to notice. Now banking has no purpose and can’t make money either. Truly they are pathetic entities.

  10. Fear was non-existent… yeah right. The good ole days when UBS overpaid for Paine Webber, spending $12-billion on a second-rate dog with oversalaried, overhyped, overpromoted Wall Street has-beens because they wanted to be bulge bracket. So then they had to get rid of the good staff because they’d guaranteed the dross they’d brought in. Since then the over-hire-over-fire cycle has been repeated annually.

  11. Costas protegee, the quote is ‘How are the mighty fallen’. As in Bible, 2 Samuel. Attention to detail – prime prerequisite for a successful banking career, not necessarily evidenced much at UBS in the last decade.

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